Guernsey: Domestic Corporate Taxion
Calculation of Taxable Base
For companies, income tax is normally assessed for the year of charge (the calendar year) on income arising in the year of computation, which is the accounting year of the company which ended in the year preceding the year of charge, or with the permission of the Administrator, in the month of January in the year of charge. Calendar year (the Year of Assessment). There are special rules for the opening and closing years of a business.
Income is defined fairly comprehensively and includes capital gains. Land and buildings (unless, broadly speaking, occupied for the purposes of the business) are chargeable on the basis of 'annual rental value' (ARV); the rules for calculating ARV are quite complex and include deductions for various types of expense.
Banks which are subsidiaries or branches of non-resident parents are allowed, by concession, a deduction of 90% of the profits made from international lending business.
Click here for details of Guernsey's Double Taxation Treaties with Jersey and the UK. There are some provisions for unilateral relief on taxed income received from other countries.
Allowable expenditure needs to be incurred 'wholly and exclusively' for the business and includes a fairly normal range of types of expense; mixed private/company expenses can often be apportioned.
There are capital allowances for buildings (1 1/4% annually if it is a normally substantial structure) and for glasshouses (important in Guernsey). For plant and machinery there is a pooling system for capital expenditure allowing deduction of 20% of the pool balance annually. The rules are reasonably complex.
Subject to some conditions, losses may be carried forward; terminal losses may be carried back two years.
Group relief was introduced by the Income Tax (Group Loss Relief Amendment) (Guernsey) Law 1997. Groups must consist of resident, non-exempt Guernsey businesses and outside ownership of a subsidiary company in a group is effectively limited to 10%.
No deduction is permitted for dividends paid out by a company; but a Guernsey-resident company may deduct standard rate tax from dividends paid out of taxed income (or which would have been taxed if an actual current year basis was applied). Resulting overpayments are refunded.